Asia Pacific investment underweight in real estate

Asia Pacific investment underweight in real estateAsia Pacific institutional investors are expected to pump an additional US$240 billion into global property markets by 2020, according to CBRE’s latest report.According to Institutional Investors in the Global Real Estate Market, Asia Pacific institutions – which include sovereign wealth funds, pension funds and insurance companies – were sitting on a combined war chest of nearly US$15 trillion by the end of 2014. This represents around a quarter of global assets under management.Capital has traditionally been allocated to equities and bonds, but declining bond yields after the global financial crisis has pushed capital in search of higher returns, including real estate.Marc Giuffrida, CBRE’s executive director of Global Capital Markets, estimates that Asian institutional investors today have real estate allocations of around two per cent. This is more than it was three years ago, but still “considerably below their own internal targets and much less than their OECD peers” which currently sits at five to seven per cent. “This allocation gap, combined with real estate’s attractive risk-adjusted returns, is why we are seeing an acceleration of investment plans by institutional investors, not just globally but regionally as well.”According to CBRE’s senior director of Research Ada Choi, five of the top 10 global sovereign wealth and pension funds are from Asia Pacific, and have already diversified into overseas real estate. “A number of Asia Pacific institutions have also announced plans to further increase their allocations to property investments, which we expect is going to set the example for other institutions and attract them to similarly invest in real estate,” Choi says.CBRE recorded US$20 billion in total direct commercial property investments by Asia Pacific institutional investors in 2014 and close to US$10 billion in the first quarter of 2015. Download Institutional Investors in the Global Real Estate Market.